U.S to Crackdown on its Own Sanctions Policy

Feb. 6, 2023
By: Marvin E. McPherson

When confronted with foreign challenges, the United States has preferred one response above all others: economic sanctions. Today, the United States’ use of sanctions, generally defined as restrictions on foreign commerce for purposes of foreign policy or national security, has taken center stage to economically hampers bad actors. While most past sanctions actions have affected business, a refocus on multilateralism has shined a light on governmental participation.

Most recently, Congress is taking steps to ensure that the U.S government adheres to its own sanctions policy. On Feb 2, 2023, Rep. Tenney [Rep.-R-NY-24] introduced a House companion bill to Sen. Rubio’s “S. 143 - A bill to prohibit the provision of Federal funds to certain entities subject to sanctions imposed by the United States.” This bill, introduced to the Senate last year and reintroduced this year, would subject the U.S government to the same sanctions prohibitions (although not the same enforcement provisions) as U.S companies and persons.

The bill introduces two prohibitions: (a) prohibition on federal contracts in which “the head of an executive agency may not enter into, renew, or extend a contract with a covered entity”; and (b) prohibition of provisions of Federal funds in which “no amounts provided by the Federal Government to any entity may be used by that entity to purchase goods or services from, invest in, enter into contract with, or otherwise provide funding to a covered entity.”

Unusually in the current Congress, we expect to see movement on both of these bills and support on both sides of the aisle. If passed in the current form, this would further punish those parties listed on the Specially Designated Nationals and Blocked Persons list ("SDN List") and all other sanctions lists administered by OFAC.

It’s often said that’s good for the goose is good for the gander. This is especially true for nongovernmental entities. Organizations are responsible to ensure that business is not transacted with prohibited or restricted companies, countries or persons. Criminal and civil penalties, including fines, imprisonment and the denial of export privileges, can be imposed on exporters, their intermediaries or agents that export, re-export, facilitate, forward or transport goods to sanctioned, restricted parties or countries. While the bill does not provide for prison, fines, etc. it does make such transactions unlawful for the Federal government as well.

Any attorney at Barnes, Richardson & Colburn can assist with any concerns of the scope of the sanctions laws and regulations, as well as guiding your organization through the due diligence process. If you have any questions, feel free to contact us.